Gates says penalties would harm security

Bill Gates, co-founder and chairman of Microsoft, yesterday said the software firm would be unable to improve security on its Windows operating system if the tough penalties demanded by nine US states are imposed.

Mr Gates was taking the stand for the second day in the Washington DC federal courts in the long-running antitrust case against the software group.

Under questioning, he again managed to maintain an even temper and avoid the irascibility that damaged Microsoft's case during his only other appearance via video four years ago.

One penalty under discussion yesterday would require Microsoft to carry on selling older versions of Windows after it had launched a new version. Mr Gates said that meant Microsoft would not be able to recall or replace a version if a serious security hole is found.

"I don't see anything in here that gives one a judgment call in the case of security of intellectual property violation," he said.

Steven Kuney, a lawyer representing the nine states, said Mr Gates was in fact afraid of the consequences of giving consumers the choice of an older, cheaper version of Windows if they didn't want the new features.

"You're not interested in giving consumers choice in a variety of features, because then people would not adopt the new software as quickly as you would like," Mr Kuney said.

Microsoft reached settlement with nine other US states and the justice department but is facing calls for harsher sanctions in the present hearings. A court concluded a little over two years ago that the company had abused its monopoly by stifling competition.

The pressures on Mr Gates intensified on Monday when the technology chief behind the Xbox video games console quit, less than a week after Microsoft admitted that sales had been disappointing. Seamus Blackley, who had been a main architect of the project, has left the group to join a start-up games company.

Microsoft has slashed the price of Xbox in Europe in an attempt to kick-start disappointing sales. The company expects first-year shipments to be between 3.5m and 4m, instead of up to 6m previously forecast.

In day two of the trial Mr Gates complained that many of the proposals put forward by the more combative states were "too broad, too vague and have a host of dire consequences for the company".

Mr Gates was accused of being too literal and paranoid in his interpretation of the tougher sanctions. He responded: "It is part of my job to look across the horizon at the world of competition and be as scared as I can about the possibilities."

The justice department and the other nine states settled with Microsoft in the autumn but their deal is awaiting court approval, pending the outcome of the current hearings.

The tougher penalties would require Microsoft to share with competitors technical information and blueprints on how some of its most popular software works. It would also be required to create a modular version of Windows that could incorporate other software makers' products.